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E-Marketing 4/EJudy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 7: Consumer Behavior

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Chapter 7 Objectives

• After reading Chapter 7 you will be able to:• Discuss general statistics about the Internet

population.• Describe the Internet exchange process and the

technological, social/cultural and legal context in which consumers participate in this process.

• Outline the broad individual characteristics and consumer resources that consumers bring to the online exchange.

• Highlight the four main categories of outcomes that consumers seek from online exchanges.

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• Hanover Direct’s 4 million customers buy through 12 different catalogs and Web sites.

• 99% of telephone customers complete an order; only 2% of all online visitors buy during a visit.

• Consumer research revealed several reasons for shopping cart abandonment:

• Technical difficulties.• Consumer indecision at final check-out page.

• By monitoring online behavior, Hanover has achieved 33% improvement.

The Hanover Story

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• The Internet has grown faster than any other medium in history.

• In 2004, 958 million people had access, representing 16% of the global population.

• Internet usage in developed nations has reached a critical mass, leading marketers to ask more questions about consumer behavior on the Internet.

Consumers in the 21st Century

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Where Are the Other 5.5 Billion People?

• Not online!

• In survey of non-Internet users:40% said they have no need for the Internet. E-marketers’ are digging deeper for a more thorough understanding of

consumer preferences online and offline.

• Main reasons why consumers do not use the Internet: Social, cultural, technological, legal, and political issues. Without major shifts some countries may not achieve high levels of

Internet adoption among individual consumers for many years.

• In these countries the B2B market will lead consumers to the Net where a fast-growing consumer market enticed businesses online.

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Reason % Reason %

No need for it 40 Content not of interest / relevance

2

Don’t have a computer 33 Not my choice/decision at work 2

Not interested in it 25 Content not in my language 1

Don’t know how to use it 16 Cost for ISP/access cost 1

Cost (general) 12 Cost for local telephone and toll service charges

1

Not enough time to use it 8

Don’t know how to get it 3 Other 4

Current PC can’t access Web 2 Unsure 2

Biggest Reasons for Not Using the Internet Source: Pastore (2001) citing Ipsos-Reid study

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Consumers in the 21st Century

• Internet usage is still growing. • Marketers have turned their attention to practical questions

such as:• Whether a firm’s target market is online, • What these customers do online, • What determines whether they’ll buy from a site,• How much of the marketing effort should be devoted to online

channels.

• Understanding online consumer behavior helps marketers design marketing mixes that provide value and thus attract and retain customers.

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Inside the Internet Exchange Process

• What explains consumer buying behavior?

• Stimuli = marketing communication messages and cultural, political, economic, and technological factors.

• Individual buyer characteristics = income level, personality, psychological, social, and personal aspects.

• Consumers move through a variety of decision processes based on situational and product attributes.

To create effective marketing strategies, e-marketers need to understand what motivates people to buy goods and services, both in the short and long term.

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Inside the Internet Exchange Process

• The e-marketing: “...creating exchanges that satisfy individual consumer and organizational customers’ objectives.”

• Exchange = act of obtaining a desired object from someone by offering something in return.

• Individuals bring their own characteristics + personal resources (within a social, cultural, and technological context) to the process as they seek specific outcomes from an exchange.

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• Exchange refers to the act of obtaining a desired object by offering something in return.

• Exchange occurs within a technological, social/cultural, and legal context.

The Internet Exchange Process

Technological, Social/Cultural and Legal Context

IndividualCharacteristicsResources

InternetExchange

OutcomesConnectEnjoyLearnTrade

Marketing Stimuli

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Technological Context

• 35% of online Americans connect to the Internet with a broadband connection.

• Broadband has increased by 20% in the past 2 years.

• The U.S. is only the 10th largest broadband market.

• Broadband users exhibit different online behavior than those using mobile handheld devices or dial up.

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Top Broadband Country Markets

70.5%

50.3%

43.2%

36.2%

28.6%

28.0%

25.7%

24.7%

23.1%

22.5%

0% 10% 20% 30% 40% 50% 60% 70% 80%

South Korea

Hong Kong

Taiwan

Canada

Singapore

Japan

Denmark

Belgium

Switzerland

United StatesC

ou

ntr

y

Broadband Penetration

New Data: http://www.internetworldstats.com/dsl.htm

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Social and Cultural Contexts• Social/cultural trends have a huge effect on

online exchanges.• Information overload overwhelms consumers.• Time poverty creates multitasking and contributes

to a stressful environment.• Home and work boundaries are dissolving.• Consumers seek convenience and have high

expectations regarding customer service.• “free, perfect, now!”

• Consumers cannot do without Internet access: “online oxygen.”

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Social and Cultural Contexts, cont.

• Self-service is required.

• Sophisticated consumers know they are in control and have choices.

• Privacy and data security are paramount.

• Online crime worries consumers.

http://www.ic3.gov/media/annualreports.aspx

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• Legal factors were discussed in Chapter 5.• Despite piracy laws, illegally used software

abounds.• In spite of the new Can-Spam law, the number

of unsolicited emails has increased.• However, when the recording industry sued

thousands of illegal music file downloaders, consumer behavior changed.• In 2002, 37% of online consumers shared music

files.• Only 23% shared files in 2004.

Legal Context

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• http://www.pewinternet.org/index.asp

• Individual characteristics affect Internet use.• Age, income, education, ethnicity, and gender • Attitudes toward technology• Online skill and experience• Goal orientation• Convenience or price orientation• Family life cycle

• Consumer resources for exchange• Money, time, energy and psychic costs

Individual Characteristics & Resources

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• The Internet exchange doesn’t use cash or paper checks for online transactions.

• Many forms of digital money:• Credit and debit cards.• Electronic checks through a third-party such as

PayPal.• Smart cards or Splash Plastic.• Other innovative forms are appearing in other

countries.

Monetary Cost

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• Online attention is a desirable and scarce commodity.

• Worldwide, the average user goes online 29 times/month, 49 minutes each time.

• Some researchers believe that consumers pay more focused attention online than with other media.

• Hoffman and Novak applied the concept of flow to online behavior.

Time Cost

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Flow

• The state occurring during during network navigation which is:• Characterized by a seamless sequence of

responses facilitated by machine interactivity• Intrinsically enjoyable• Accompanied by a loss of self-consciousness• Self-reinforcing

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Global Usage: 2002 to 2004

Metric Quantity

April 2002 June 2004 August 2007

Number of sessions/visits for the month 18 29 34

Number of domains visited 48 57 69

Web Pages per Person per Month n.a. 1,001 1518

Page views for each session 43 34 44

PC time spent per month n.a. 24 hours 31:25 hours

Time spent online for the month 10 hours 23 hours 31 hours

Time spent per session 32 minutes 49 minutes 56 minutes

Duration of page viewed 44 seconds 46 seconds 45 seconds

New Data: http://www.nielsen-netratings.com/resources.jsp?section=pr_netv&nav=1

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Energy and Psychic Costs• It takes effort to log on and check email,

especially for dial-up users.

• Consumers apply psychic resources to understand information or when facing technical problems.

• Shopping cart abandonment and failed online purchases have numerous causes.• Technical reasons.• The consumer may be “window shopping,”

comparing several carts at once.

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Exchange Outcomes• There are 4 basic things that people do online:

• Connect• Enjoy• Learn• Trade

• Each is ripe with marketing opportunity.• Data Sites

• http://www.clickz.com/stats • http://www.nielsen-netratings.com/• http://www.comscore.com/press/data.asp • http://www.pewinternet.org/trends.asp • http://www.internetworldstats.com/stats.htm • http://www.webreference.com/internet/statistics.html